EU compromise on Czech domestic VAT reverse charge

Next week’s meeting of EU Finance Minister is set to rediscuss the Czech Republic’s request for the temporary option of the domestic reverse charge to combat VAT fraud.

The Czechs have been pushing for several years for EU permission for the adoption of the measure, which withdraws the regular VAT charge on B2B domestic supplies. Instead, the customer must self-account for the input and output VAT. This takes the cash payment out of the transaction, and reduces the opportunity for VAT fraud. The domestic reverse charge has been permitted in the EU for a limited number of VAT fraud high-risk industries such as computer chips, mobile phones and precious metals.

The Czech request has been blocked many times on the grounds of it distorting the free operation of the single market and VAT regimes. In turn, the Czech Republic has held-up approval of the harmonization of VAT rates on e-books to the reduced rates of their printed equivalent.

Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.